Bloomberg News

Dollar Index May Advance to 17-Month High: Technical Analysis

January 09, 2012

Jan. 6 (Bloomberg) -- The Dollar Index may climb to a 17- month high, according to Gaitame.com Research Institute Ltd., citing trading patterns.

IntercontinentalExchange Inc.’s index, which tracks the greenback versus the currencies of six major U.S. trading partners, surpassed the higher range of the so-called Bollinger band yesterday for the first time in three weeks.

Given that the gauge’s 25-day moving average has risen since November, the Dollar Index may advance further, said Takuya Kawabata, a researcher in Tokyo at a unit of Japan’s largest currency margin company.

“The Dollar Index is in an upward trend on the weekly Bollinger chart as well,” he said. The gauge may head for 81.61, Kawabata said. That’s near the higher range of the band.

The index’s next target will be the 61.8 percent retracement level of 82.591 from the high in June 2010 to the low in May last year on the Fibonacci chart, according to Kawabata. Beyond that, the Dollar Index may rise to 83.559 reached in August 2010, he said.

The index was little changed at 80.883 as of 12:01 p.m. in Tokyo after touching a one-year high of 81.016 yesterday.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break above resistance, or below support, indicates it may move to the next level. Support refers to an area where buy orders may cluster. Resistance is where there may be orders to sell.

Bollinger bands display a candle chart of historical prices and show standard-deviation-based ranges around a specified moving average.

In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.

--Editors: Nate Hosoda, Jonathan Annells

To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Hiroko Komiya in Tokyo at hkomiya1@bloomberg.net

To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net


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